HR Policies & Procedures

Unlimited Vacation? 8 Benefits (And a Few Pitfalls)

Should you jump on the bandwagon of unlimited vacation? It’s touted as a good way to reward employees without increasing costs. However, it’s not without its pitfalls, says attorney Christina Gomez.

The concept of unlimited vacation is very simple: Employees can take vacation, personal, and sick time (anything that would fit into a paid time off (PTO) bank) whenever, however, and as much as they want.

Most of the time, however, such a policy contains some restrictions. For example, organizations may not limit how much time people can take off, but they might restrict how much employees can take off at once and put procedures in place for requesting vacation, says Gomez.

Gomez, who is an associate at the Denver office of law firm Holland & Hart LLP, made her comments in a recent audio conference “Unlimited Vacation: The Budget-Friendly Benefit That’s Sparking Employee Productivity.” Here’s her take on benefits of unlimited vacation:

Eight Benefits of Unlimited Vacation

Unlimited vacation has some great benefits, says Gomez.

1. It boosts employees’ morale and shows them you trust them. Unlimited vacation works best for employees who you think will have their own incentive to get their work done and strive to do a good job. Showing them that you trust them to do their work on their own time, do a good job, and manage their vacation days in a manner that works may be a productivity and morale boost they can really appreciate.

2. It provides a job perk at little or no cost. You aren’t really paying employees extra because although it may seem counterintuitive, workplaces that have these policies in effect have said their employees don’t take more vacation than they used to. Of course, some employees may take a couple more days a year than they did before, but the organizations are noticing that when the employees are actually at work, they are more productive.

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3. It encourages employees to have a balanced life and explore interests outside the workplace. These policies often mean you have happier and healthier employees. Why wouldn’t you want to encourage that?

4. It improves efficiency and productivity. With these policies in place, employees aren’t just sitting in the office to keep their seats warm for eight hours. They are making better use of the hours they are actually in the workplace. And believe it or not, some of the organizations that have implemented these policies have bragged that their productivity went up by as much as 30 percent.

5. It creates a culture of mutual respect, responsibility, and high performance. Unlimited vacation policies provide employees with a way to focus more on performance, getting the job done, meeting deadlines, and exceeding expectations.

6. It facilitates more flexible work schedules. Unlimited vacation can foster flex-time arrangements. This includes, for example, employees who work from home, come into the office only two or three days a week, or any similar type of working arrangement.

7. It reduces record-keeping time and costs. This is a key aspect of unlimited vacation and one of the reasons employers implement such policies. You can spend a lot of time and cost on accounting and administrative tasks — counting employees’ hours and trying to figure out what increments to use to count employee vacation and sick time.

8. It may avoid the obligation to pay out accrued and unused vacation time at termination. This may not work for every employer because it will depend on state law and your current policies. However, in many cases — and probably in most cases — if you move to a policy like this and you do it right, you can avoid having to keep vacation time on your balance sheet and can avoid having to pay it when employees leave.

In tomorrow’s Advisor, the risks of unlimited vacation policies, and an introduction to a unique collection of pre-written policies on about 100 critical topics.

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